German Court clarifies certain open questions regarding squeeze-out compensation

In a recently published ruling of the Higher Regional Court of Brandenburg, the court, as the appeal instance in an appraisal proceeding, had to determine whether the compensation that had been offered to squeezed-out minority shareholders was adequate (OLG Brandenburg, ruling of 26 August 2022 – docket no. 7 W 82/18, published e.g. in NZG 2023, 223 pp.). Minority shareholders of a stock corporation that are squeezed out under the applicable regime of the German Stock Corporation Act (§§ 327a pp. AktG) by a shareholder holding at least 95% of the shares are entitled to an adequate compensation in cash. The offered compensation must correspond to at least the market value of the shares, and must be communicated to the minority shareholders with the publishing of the convocation notice and agenda for the general meeting that shall resolve on the squeeze-out. Shareholders have the possibility to challenge the offered compensation in appraisal proceedings.

In its ruling, the Higher Regional Court of Brandenburg made a few interesting determinations. Amongst others, the court held that even a minor shareholding generally entitles to participate in appraisal proceedings, even if the economic interest in conducting the proceedings appears disproportionate to the financial expense (the majority shareholder had argued that certain minorities were only conducting the proceedings to collect legal fees). In addition, the court affirmed (albeit not relevant for the case at hand) the emerging practice of certain courts and opinions in legal literature that a valuation may not be required if the stock market price (three months‘ VWAP) is already a sufficient basis for ascertaining the fair value of the shares. Last but not least, the court confirmed the majority view in legal literature by concluding that after the calling of the general meeting and the publishing of the agenda that includes the offered squeeze-out compensation, the majority shareholder is no longer entitled to reduce the compensation amount. However, it still remains an open question whether the majority shareholder is entitled to vote down its own proposal in the general meeting.